Borough BOE considering insurance switch

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NAUGATUCK — Faculty and staff employed by the Board of Education may see their health insurance policy manager change from Anthem Blue Cross and Blue Shield to Cigna this year, but officials hope the transition, if made, will be a smooth one.

The board is considering a switch as one piece of a larger push to close a projected $7 million operating deficit for the 2010-2011 fiscal year, which begins July 1.

Officials invited representatives of both companies to Tuttle House Monday to hear their sales pitches. The board took no vote but noted a switch to Cigna could save an estimated $1.2 million, while impacting employees’ benefits only minimally. Only medical and prescription benefits would be switched, officials said, while vision, dental and over-65 coverage would stay with Anthem.

“We’re very conscious that we want to provide our employees the same or better benefits than they have now,” board chair Kathleen Donovan told Cigna reps.

They answered that a network match of at least 90 percent could be expected—in other words, at least nine of every 10 providers in Anthem’s network would continue to be available to beneficiaries under a Cigna-run PPO, or preferred-provider organization. And they assured the board that a robust nomination system was in place, meaning employees who had a relationship with a doctor out of Cigna’s network could nominate that provider for inclusion. Cigna reps said approximately 40 percent of nominated providers are brought into the PPO.

Mike Donnelly, a client manager for Cigna, added if the company noticed a benefit that had been reduced or cut during the switch from Anthem to Cigna, “We’ll go in and update the contract” to ensure the benefit remains intact.

Board officials said a switch would need to be sold to the union leadership and approved through the bargaining process, regardless of whether the board deems it a prudent move.

In any case, the board will remain self-insured, meaning it will continue to fully fund claims, while paying nominal administrative fees to either company to manage employees’ benefits. This system saves money by eliminating the profit margin built into a fully-funded insurance plan’s premium, but saddles the employer with the risk of bigger claims—a reality the board faced in March 2009, when a number of anomalous claims made the board pay dearly.

In fact, the savings that a switch might realize appear to be due at least in part to the two companies’ differing treatments of such aberrations. Anthem builds those abnormalities into its projections for the next year, which determine how much the board budgets to fund claims; on the other hand, Cigna “normalizes” such anomalies in its projections, finance subcommittee chair Barbara Lewis said, bringing down its figures.

Officials pressed Anthem’s representatives about why they should stay with a company that could cost them more money for the same benefits.

“If I can switch to another carrier and save $1 million or $2 million, or somewhere in between,” asked board member Dave Heller, “why should I stay and pay that extra cost, while I have to make cuts in other areas?”

Anthem representatives said the company’s familiarity with the municipal market—Anthem insures more than 92 percent of Connecticut municipalities, according to its report—gives it an upper hand, even if administrative fees are slightly higher or its underwriting process somewhat more conservative.

“We have a creditable pool of Connecticut information to make accurate projections,” Christine Higgins, an Anthem sales director, said. “What we believe differentiates us is that we’ve built the infrastructure to support our full suite of [insurance] products.”

On the other hand, Donnelly, the Cigna rep, noted: “I can tell you what we’re not going to be: complacent. We’re not a leader in the municipal market, but we want to be. We’re hungry.”

When asked how the federal health care legislation President Barack Obama signed into law Tuesday would affect their business, both carriers said it was hard to predict. But Cigna rep Joe Wankerl said he thinks his company is “in the best position of any carrier out there” because it has little stake in Medicare or Medicaid, the federal programs most affected by the new law.

“There’s still a lot of uncertainty in where health care reform is going,” he said, “but Cigna is in a unique position not to be impacted.”

Both Anthem and Cigna said they were willing to offer stop-loss coverage at 120 percent, meaning if claims ran over the predicted amount, the board would be responsible for the first 20 percent of overage, while the carrier would assume the risk after that. Both also said they would expect claims to stay within a 5-percent margin of error from their predictions.

Cigna said it could guarantee no more than a 5-percent increase to administrative fees between years two and three of coverage; Anthem explicitly guaranteed a minimum of a 4-percent fee increase in year two. And both explicitly said they were “in it for the long haul” with the board.

Mayor Bob Mezzo noted that the borough is also considering a switch to Cigna and said he’s talking with union representatives about the possibility of a switch. He, along with Heller and board member Rocky Vitale, strongly suggested the board do the same and open a line of dialogue with its various bargaining units.

“What happens [when people find out through the media rather than through the board] is you have people at McDonald’s or Stop and Shop and they’re saying, ‘Hey, they’re changing our health benefits and not even telling us.’ Before the process starts, it’s souring,” Mezzo said.

The board will likely vote on the insurance carriers—as well as the controversial reconfiguration plans—at a special meeting March 30, which is provisionally scheduled for 6:30 p.m. at the Naugatuck High School media center.